The latest official data shows that new residential prices in 100 cities rose slightly in April, but pre-owned housing prices showed no signs of stopping their decline. Analysts believe that the macroeconomic situation is closely linked, and the US-China tariff trade war will further exacerbate the deterioration of China's real estate market.
According to data released by the China Index Academy (CIA) on the 1st, based on survey data from 100 Chinese cities, including new and pre-owned residential sales, and 50 cities' rental markets, the average price of new homes in these 100 cities saw a structural increase of 0.14% month-over-month in April, and a year-over-year increase of 2.50%. While prices in first- and second-tier cities managed to hold up, new home prices in third- and fourth-tier cities fell by 0.11% month-over-month.
Regarding pre-owned housing, the report shows that the secondary housing market in core cities remains relatively active. However, despite a high number of listings, the market trend of "trading price for volume" remains dominant. In April, the average price of pre-owned residential properties in 100 cities fell by 0.69% month-on-month and 7.23% year-on-year. Meanwhile, rental demand also slowed, with the average rent in 50 cities falling by 0.32% month-on-month and 3.40% year-on-year.
Huang Zhicong: China's housing market still has some time to stabilize
Huang Zhicong, Distinguished Professor of Finance at National Chengchi University, told RT-Mart that China's real estate market still needs time to adjust and will not stabilize quickly. This is especially true with the large number of vacant homes and unfinished buildings, which China will need a significant amount of time to sort out. "In the past, China had a large number of unfinished buildings, leading the Chinese government to implement a 'guaranteed delivery' policy. While there have been some signs of a slight recovery in new construction, this has also squeezed out some transactions in the pre-owned housing market, and the Chinese real estate market has yet to see a easing."
Chen Pokong: Shrinking foreign trade, wage arrears and unemployment exacerbate the deteriorating housing market
Current affairs commentator Chen Pokong told this station that China's economic downturn and foreign trade are linked. The US-China tariff trade war, which began in early April, led to many Chinese factory closures, reduced orders, and a backlog of goods. This contributed to a decline in the Chinese economy, businesses struggling to pay wages, and employee layoffs. These factors, combined, are negative for the real estate market.
"The official data from China showing an increase in new home purchases is not credible, but the decline in second-hand home prices should be the real situation. In fact, China's real estate market has long been in a cold winter. Under the shadow of the tariff war and trade war, it will only get worse and will not get better. Neither adjusting housing prices nor liberalizing them can save China's real estate market," he said.
Chen Pokong further pointed out that China has lacked domestic demand over the past 40 years, relying instead on real estate to drive the economy. This is because Chinese people lack a sense of security, unlike Americans who are willing to spend and avoid saving. Real estate, however, is one of the ways Chinese people preserve their wealth. The current housing market downturn, with transactions sluggish and prices in some areas even dropping to rock-bottom levels, is a severe blow to the middle class. "All of this is interconnected within the macroeconomy; no single component can exist or be viewed in isolation. Therefore, trade wars and tariff wars will only exacerbate the collapse of China's real estate market, with no signs of recovery."
The three major drivers cannot drive China's economy
Exports, consumption, and investment are the three pillars driving China's economy. Huang Zhicong analyzed that China's sluggish consumption shows no signs of improvement. While investment may be occurring, whether it is effective remains to be assessed. The most important pillar is foreign trade. If the tariff war continues, it will have a significant impact on the Chinese economy. He noted that Chinese leader Xi Jinping visited Southeast Asia at the beginning of the tariff war, attempting to rally friendly countries and ease the impact on exports to the US, but this also faced challenges.
"Finding a market as large as the United States that can absorb Chinese exports is not easy. Countries like Vietnam, Malaysia, and Cambodia, which Xi Jinping visited, are also highly dependent on exports to the United States, and the United States has emphasized the prohibition of 'washing the origin of products.'"
Monetary and fiscal measures are in a tug-of-war between inflation and economic stimulus
Despite the significant impact of trade setbacks with the US on the Chinese economy, Chinese officials are maintaining a tough stance in the tariff war. Huang Zhicong analyzes that, in addition to relying on domestic consumer demand for support, China still has monetary and fiscal policies at its disposal. "China could adopt a loose monetary policy, but the risk is that it could further drive up inflation, something the Chinese government would not welcome. How to strike a balance between inflation and economic stimulus is an urgent issue for the Chinese government."
As for fiscal policy, while China's local governments are facing significant debt, the public has accumulated significant savings. The Chinese government can increase government spending by issuing bonds to encourage public purchases. "However, the combined effects of monetary and fiscal policies will also lead to price increases. If the economy improves slightly, the Chinese government will not actively pursue both measures. If the economy deteriorates, the Chinese government will likely adopt a two-pronged approach to address the current economic difficulties."
At the beginning of this year, DeepSeek's sudden emergence was met with jubilation in Chinese state media, creating the illusion of a thriving Chinese economy. However, the sluggish real estate market, the locomotive of the economy, remains unresolved, and foreign trade has suffered setbacks, with no outlets. Faced with these pressures, can China still achieve its target of 5% economic growth this year?
China's economic downturn could solve Beijing's traffic jams
Chen Pokong analyzed that China's two remaining advantages are foreign trade, where it maintains a trade surplus with Europe and Southeast Asia. However, this cannot offset the decline in exports to the US. Secondly, Chinese electric vehicles, leveraging their low-price dumping advantage, have gained ground in markets outside the US, but this has also aroused the vigilance of other countries, prompting countermeasures. China's current situation is far from what the official media portrays.
He mentioned a popular Chinese joke: Neither Jiang Zemin nor Hu Jintao could solve Beijing's traffic congestion problem, but Xi Jinping did. "Chinese people stopped spending, restaurants and shopping malls were deserted, and the streets were empty, so traffic jams decreased. Xi Jinping used economic depression to solve the capital's traffic congestion problem."
